Vietnam’s leather and footwear exports target niche markets

09:30 | 22/01/2018 Trade

(VEN) - The Vietnamese leather and footwear industry grew 10 percent from 2016-2017, creating good impetus for further growth in 2018, which would coincide with opportunities from the enforcement of free trade agreements (FTAs). Businesses in the sector are also trying to expand capacity and make the most of new opportunities.

Businesses in the leather and footwear sector have boosted investment in distribution systems, design and quality of products

Two-digit growth

The leather and footwear industry generated US$17 billion in exports in 2017, a 10 percent increase from a year ago. The US remained Vietnam’s biggest export market, contributing about 34 percent of total revenues. The Nike brand, for example, maintained a stable number of orders with 70 factories in Vietnam, becoming a driving force for the continued growth in Vietnamese footwear exports to the US market.

Following it was the EU, importing a sharp increase of Vietnamese footwear in 2017 and contributing more than 30 percent of Vietnam’s total footwear export revenues and about 11 percent to Vietnam’s footwear export revenues from the EU.

In addition, exports of this kind to other major markets like the Republic of Korea, Japan and China increased in a stable manner.

Apart from exports, significant improvements in the domestic market also contributed to the general growth of the leather and footwear industry in 2017, as a result of proper investment in distribution systems, design and quality of products.

Improving export quality

Vietnam Leather, Footwear and Handbag Association general secretary Phan Thi Thanh Xuan, said the sector is likely to grow faster in 2018 for many reasons.

First, the EU-Vietnam Free Trade Agreement (EVFTA) is scheduled for conclusion in the middle of this year. When compared with China, Vietnam’s biggest rival, Vietnamese footwear will enjoy a reduction of 3.5-4.2 percent in terms of tariff on exports to the EU. After the EVFTA takes effect, the tariff will drop to zero percent. In particular, the tariff on Vietnamese sports shoes, which account for two-thirds of Vietnamese total footwear exports to the EU, will be cut immediately, rather than being subject to the seven-year protection tariff on leather footwear. Similarly, the tariff on handbags will also be slashed to zero. “For sure, many orders will come to Vietnam. The only question is how domestic businesses take advantage of this agreement,” said Xuan.

Meanwhile, the American Apparel & Footwear Association (AAFA) is boosting the adoption of a draft law, which is to cut tariffs on a number of import items, including several dozen kinds of Vietnamese footwear, textiles and garments.
According to many experts, international economic integration has opened up opportunities for Vietnam to receive leather and footwear orders. Of particular value are big brand names that bring their capital and know-how, creating both opportunities and challenges for domestic enterprises. The resulting competition has forced domestic manufacturers to invest in their business in order to secure big orders and meet requirements both in terms of quality and delivery time.

In light of this trend, a number of businesses have chosen niche markets such as Japan and the United Arab Emirates, which are small-sized but with good-income consumers and preference for unusual products. “This is the long-term development trend of the Vietnamese leather and footwear industry in the next 15-20 years,” said Xuan.

The local content of Vietnamese leather and footwear has increased significantly, and 80-90 percent of materials for production of several kinds of footwear, such as fabric and sports shoes, are now made in Vietnam. For this reason, Vietnamese businesses are likely to meet the rules of origin and to benefit from tariff preferences.

Bui Viet